Over the course of many years of marriage, couples generally accumulate a large sum of money for retirement. Whether through careful saving and investment, working hard and earning a pension, or any combination of other investment strategies, Illinois couples depend upon their retirement plans to carry them throughout their later years.
The prospect of divorce can feel very threatening to your retirement income, and rightfully so; marital assets must all be divided in divorce and this can leave both you and your spouse with more expenses and less resources. However, with careful planning, rigorous negotiation, and excellent legal representation, there are ways for you to protect your retirement goals during divorce. Here are three great steps to help you begin.
Understand Your Retirement Plans and Administrative Rules
Couples often divide labor, leaving one spouse to manage certain parts of the household and one spouse to handle the rest. Finances are frequently managed by only one spouse, and if you are the spouse who is not very involved in handling money, now is the time to begin.
Not all retirement plans are structured the same and different plan administrators may have different rules for how plans are handled in a divorce. For example, some plans (such as a 401k) may be divided and each spouse may roll their portion into a new account without suffering tax consequences using a Qualified Domestic Relations Order (QDRO). Other plans, such as government Thrift Savings Plans (TSPs), require a Retirement Benefits Court Order (RBCO) that freezes the account until the non-contributing spouse’s award is paid out. Knowing this information is essential for ensuring you can negotiate knowledgeably for your own interests.
Learn About Social Security Benefits
If you and your spouse have been married for at least 10 years, you may qualify for Social Security benefits based on your spouse’s work history (and vice versa). This is especially helpful when one spouse significantly outearns the other, such as in the case of a partner who stays home to raise children. An individual can only receive benefits for one person at a time, so if you elect to receive benefits based on your spouse’s work history, it is important to know how much payments would be.
Get Qualified Financial Advice
While it can be difficult to take on yet another expense during divorce, hiring experienced financial professionals to help you manage and restructure your assets can save you far more money in the long run than it costs to hire their help up front. You need to make sure you understand the tax implications of any proposed divorce settlement, ensure that a proposed settlement is good for your long-term financial health, and get help handling paperwork so that you do not face any tax penalties or fines for inadvertently mismanaging accounts.
Contact a Barrington Divorce Lawyer
For couples approaching retirement, dividing assets wisely is essential for long-term financial health after divorce. At the Law Office of Nicholas W. Richardson, P.C., our Inverness divorce attorney works assiduously to ensure you get a fair divorce decree and that you are prepared to approach retirement on the strongest footing possible. Call us at 847.873.6741 today to schedule a free, confidential consultation.